Earlier this week the world's largest mobile carrier, China Mobile (NYSE:CHL), launched a pre-order site for the new, not-yet-released Apple (NASDAQ:AAPL) iPhones. It wasn't the first time the carrier has done as much for an Apple product, and the pre-emptive move is just a small showing of just how much China Mobile is betting on Apple's new device.
More than just pre-orders
Just one day after China Mobile's launched the iPhone 6 pre-order website, news site China Daily reported the company had garnered 33,000 pre-orders.
While that's an impressive 24-hour number, there's much more to building up a successful iPhone 6 China launch than just a pre-order site.
China Mobile has been tirelessly building out its 4G network and convincing subscribers that it's worth upgrading from feature phones to smartphones. Since February of this year, the carrier has increased 4G subscribers from just 1.3 million to 20.4 million by the end of July.
Selling the faster (and more expensive) data plans to its subscribers is obviously a great thing for China Mobile, but the company still has a long way to go. Right now the carrier has about 793 million mobile subscribers, but just a fraction of them are on its new 4G network. To lure those customers to more expensive data plans, China Mobile needs some serious incentives.
And that's where the larger iPhone comes into play.
Kantar Worldpanel released data back in April showing that Chinese consumers are in the market for larger devices, and that 40% of smartphones sold in the country had a screen size larger than five inches. The next iPhone, which will debut on September 9, will most likely go on sale with 4.7-inch and 5.5-inch displays.
Kantar's global strategic insight director, Dominic Sunnebo, said in the report:
"It's clear that phablets really are changing the way Chinese consumers use smartphones. More than one in five phablet owners now watch mobile TV on a daily basis, half do so at least once a month, and this is without widespread availability of 4G."
And that's where things get interesting. Apple is releasing larger iPhones at a time where Chinese consumers are purchasing bigger devices and while China Mobile's 4G network is taking off. If we follow Sunnebo's logic, Apple's next device will be a huge win for China Mobile.
Apple's recent success in China
Over the past two quarters, China has been a bright spot for Apple. In fiscal Q2, revenue increased 13% year-over-year in the greater China region, partly due to strong sales of its iPhone through China Mobile.
In fiscal Q3, which was reported at the end of July, things got even better. iPhone sales in China were up 48% and revenue in the country increased 28%, year-over-year.
And that was without two new, bigger iPhones.
Foolish final thoughts
While Apple's past performance in China doesn't predict future success, the growing demand for larger smartphones -- both in China and around the globe -- mixed with China's current demand for Apple devices and China Mobile's growing 4G network, could prove a very successful combination for an iPhone launch in the country.
We're just at the beginning stages of China Mobile's 4G growth, and smaller carriers in the country are also building out their faster networks as well. As they do, Apple should enjoy strong growth in the high-end Chinese market, especially as its rival Samsung has struggled in the country lately. The only thing that could slow down Apple would be if Chinese consumers opted more for the plethora of inexpensive and feature-packed smartphones offered by companies like Xiaomi.
A Morningstar investor note released this week by analyst Brian Colello, said the two main drivers for iPhone 6 growth will be early upgrade options for consumers in the US and Apple's partnership with China Mobile. As the Apple and China Mobile relationship has brought considerable success for both companies so far, the next few months should prove even more promising.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple and China Mobile. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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